10-QPeriod: Q3 FY2009

HONEYWELL INTERNATIONAL INC Quarterly Report for Q3 Ended Sep 30, 2009

Filed October 23, 2009For Securities:HONHONIV

Summary

Honeywell International Inc. (HON) reported its third quarter and nine-month results for the period ending September 30, 2009. The company experienced a significant decline in net sales, down 17% for the quarter and 18% year-to-date compared to the prior year. This decline was primarily driven by lower sales volumes across all segments, reflecting the challenging macroeconomic environment. Despite the sales decrease, Honeywell managed to improve its gross margin percentage, indicating effective cost management. Net income attributable to Honeywell was $608 million for the quarter and $1,455 million year-to-date, down from $719 million and $2,085 million, respectively, in the comparable periods of 2008. Diluted earnings per share also saw a decline. The company's cash flow from operations remained robust, increasing slightly year-over-year, while cash used in investing activities decreased significantly due to lower acquisition spending. Honeywell also reported progress in managing its significant environmental and asbestos-related liabilities.

Financial Highlights

47 data points
Beta

Revenue

$7.70B

24.2% Gross Margin

Net Income

$592.00M

7.7% Net Margin

EPS (Diluted)

$0.77

Total Assets

$35.77B

Cash & Equivalents

$2.60B

Free Cash Flow

$1.02B

Financial Statements
Beta
Revenue$7.70B
Cost of Revenue$5.80B
Gross Profit$1.86B
SG&A Expenses$1.03B
Net Income$592.00M
EPS (Basic)$0.78
EPS (Diluted)$0.77
Shares Outstanding (Diluted)764.00M

Key Highlights

  • 1Net sales decreased by 17% in Q3 2009 and 18% year-to-date, primarily due to volume declines reflecting a challenging economic environment.
  • 2Gross margin percentage improved to 24.7% in Q3 2009 and 24.5% year-to-date, up from 19.4% and 22.9% respectively in the prior year, driven by cost efficiencies and repositioning charges.
  • 3Net income attributable to Honeywell decreased to $608 million for Q3 2009 and $1,455 million year-to-date, compared to $719 million and $2,085 million in 2008.
  • 4Diluted EPS declined to $0.80 for Q3 2009 and $1.94 year-to-date, versus $0.97 and $2.79 in the prior year.
  • 5Cash provided by operating activities increased to $2,615 million year-to-date, an improvement from $2,532 million in 2008, signaling strong operational cash generation.
  • 6Acquisition spending significantly decreased, with cash used in investing activities falling to $850 million year-to-date from $1,670 million in 2008.
  • 7The company continued to manage significant environmental and asbestos-related liabilities, with ongoing accruals and insurance receivable recognition.

Frequently Asked Questions

The primary driver of the decrease in net sales was lower sales volume across all business segments, a direct reflection of the challenging global economic conditions and their impact on customer demand and industrial activity.

Honeywell implemented cost-saving initiatives, including reduced labor costs, lower material costs, benefits from prior repositioning actions, and indirect cost savings. These measures helped to improve the gross margin percentage despite the lower sales volume.

Honeywell demonstrated strong operational cash flow, with an increase in cash provided by operating activities year-to-date. The company also significantly reduced its cash used in investing activities, mainly due to a substantial decrease in acquisition spending, indicating a focus on cash preservation and operational efficiency in the prevailing economic climate.

Honeywell manages substantial environmental and asbestos-related liabilities stemming from past operations and predecessor companies. The company accrues for probable and reasonably estimable costs associated with these matters and also recognizes insurance receivables for probable recoveries. For asbestos liabilities, specific trust structures and insurance coverage are in place to manage ongoing and future claims.